<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------
FORM 10-Q
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 2000
CEDAR INCOME FUND, LTD.
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(Exact name of registrant as specified in charter)
Maryland 0-14510 42-1241468
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(State or other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
44 South Bayles Avenue, Port Washington, New York 11050
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 767-6492
Uni-Invest (U.S.A.), Ltd.
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(Former name or former address, if changed since last report)
<PAGE>
CEDAR INCOME FUND, LTD.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 2000 (unaudited) and
December 31, 1999
Consolidated Statements of Shareholders' Equity -
June 30, 2000 (unaudited) and December 31, 1999
Consolidated Statements of Operations
Three Months Ended June 30, 2000 and 1999 (unaudited), and,
Six Months Ended June 30, 2000 and 1999 (unaudited)
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999 (unaudited)
Notes to Consolidated Financial Statements - June 30, 2000
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure of Market Risk
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
CEDAR INCOME FUND, LTD.
Consolidated Balance Sheets
June 30, 2000 December 31,
(Unaudited) 1999
------------ ------------
Assets
Real Estate
Land $ 2,981,696 $ 4,144,705
Buildings and improvements 9,783,500 15,041,317
------------ ------------
12,765,196 19,186,022
Less accumulated depreciation (3,876,967) (5,190,825)
------------ ------------
Real Estate 8,888,229 13,995,197
Real estate held for sale 1,850,000 --
Property deposits 2,734,951 --
Cash and cash equivalents 2,363,044 2,298,334
Rents and other receivables 85,589 98,629
Deferred financing costs 331,951 --
Deferred legal 114,561 --
Prepaid expenses 49,309 101,892
Deferred lease commissions 91,947 122,944
Deferred rental income 10,156 12,312
Due from co-tenancy partner -- 56,993
Taxes held in escrow -- 6,259
------------ ------------
Total Assets $ 16,519,737 $ 16,692,560
============ ============
Liabilities and Shareholders' Equity
Liabilities
Mortgage loan payable -- 1,346,750
Line of credit 1,515,644 --
Accounts payable and accrued expenses 491,360 365,790
Due to co-tenancy partner -- 46,158
Security deposits 78,455 87,919
Advance rents 51,617 42,095
------------ ------------
Total Liabilities 2,137,076 1,888,712
------------ ------------
Limited partner's interest in consolidated
Operating Partnership 9,320,361 9,560,913
Shareholders' Equity
Common stock ($.01 par value
50,000,000 shares authorized, 942,111
shares outstanding 9,421 9,421
Additional paid-in-capital 5,052,879 5,233,514
------------ ------------
Total shareholders' equity 5,062,300 5,242,935
------------ ------------
Total liabilities and shareholder's equity $ 16,519,737 $ 16,692,560
============ ============
<PAGE>
CEDAR INCOME FUND, LTD.
Consolidated Statements of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Additional Undistributed Total
Common Paid-In Net Shareholders'
Stock Capital Income Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1999 $ 9,421 $ 5,233,514 $ -- $ 5,242,935
Net income -- 7,960 7,960
Dividends to shareholders -- (180,635) (7,960) (188,595)
----------- ----------- ----------- -----------
Balance at June 30, 2000 $ 9,421 $ 5,202,879 $ -- $ 5,062,300
=========== =========== =========== ===========
</TABLE>
<PAGE>
CEDAR INCOME FUND, LTD.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Rents $ 558,240 $ 594,825 $ 1,214,132 $ 1,248,076
Other Income 75,000 75,000
Interest 42,598 6,116 83,146 13,136
----------- ----------- ----------- -----------
Total Revenue 600,838 675,941 1,297,278 1,336,212
----------- ----------- ----------- -----------
Expenses
Property expenses:
Real estate taxes 58,824 62,877 124,754 125,160
Repairs and maintenance 58,720 72,427 115,308 125,782
Utilities 39,924 35,871 78,720 73,219
Management fee 25,649 31,435 60,385 61,984
Insurance 5,922 3,557 12,636 7,943
Other 27,818 32,515 41,917 52,174
----------- ----------- ----------- -----------
Property expenses, excluding depreciation 216,857 238,682 433,720 446,262
Depreciation 105,527 146,728 220,356 272,707
----------- ----------- ----------- -----------
Total property expenses 322,384 385,410 654,076 718,969
Interest 41,158 32,009 72,665 64,177
Administrative fees 20,607 24,468 41,941 48,936
Directors' fees and expenses 24,468 23,558 48,936 51,426
Disposition fee 22,500 -- 22,500 --
Other administrative 106,101 94,315 186,491 157,973
----------- ----------- ----------- -----------
Total Expenses 537,218 559,760 1,026,609 1,041,481
----------- ----------- ----------- -----------
Net income (loss) before loss on impairment
and gain on disposal 63,620 116,181 270,669 294,731
Loss on impairment (203,979) -- (203,979) --
Gain on disposal 91,012 -- 91,012 --
Net income (loss) before limited partner's interest
in Operating Partnership (49,347) 116,181 157,702 294,731
Limited partner's interest 11,234 (96,659) (132,240) (238,245)
----------- ----------- ----------- -----------
Net income (loss) before extraordinary item (38,113) 19,522 25,462 56,486
Extraordinary item
Extraordinary loss on extinguishment of
debt, net of limited partners interest in
Consolidated Operating Partnership of 32,073 (17,502) -- (17,502) --
----------- ----------- ----------- -----------
Net income (loss) (55,615) 19,522 7,960 56,486
=========== =========== =========== ===========
Net earnings (loss) before extraordinary item
per share (0.04) 0.04 0.03 0.10
Extraordinary loss per share (0.02) -- (0.02) --
----------- ----------- ----------- -----------
Net earnings (loss) per share $ (0.06) 0.04 0.01 0.10
=========== =========== =========== ===========
Dividends to shareholders $ 94,211 $ 54,211 $ 188,595 $ 108,422
=========== =========== =========== ===========
Dividends to shareholders per share $ 0.10 0.10 0.20 0.20
=========== =========== =========== ===========
Average number of shares outstanding 942,111 542,111 942,111 542,111
=========== =========== =========== ===========
</TABLE>
<PAGE>
CEDAR INCOME FUND, INC.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
June 30, June 30,
2000 1999
----------- -----------
<S> <C> <C>
Net income $ 7,960 $ 56,486
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Limited partner's interest in Operating Partnership 132,240 238,245
Gain on sale of Germantown Square (91,012)
Loss on real estate impairment 203,979
Early extinguishment of debt (49,575)
Depreciation and amortization 220,356 272,707
Decrease (increase) in deferred rental receivable 2,156 (16,428)
Changes in operating assets and liabilities:
(Increase) decrease in rent and other receivables 12,698 (133,167)
Decrease (increase) in prepaid expenses 52,583 (17,285)
Decrease in deferred leasing commissions 30,997 13,480
Decrease in tax held in escrow 6,259 1,908
Increase in accounts payable 125,570 56,226
Decrease in amounts due from co-tenancy partner 56,993 19,205
Decrease in amounts due to co-tenancy partner (46,158) (29,408)
Security deposits collected, net (9,464) 10,787
Increase in advance rents 9,522 39,153
----------- -----------
Net cash provided by operating activities 665,446 511,909
Cash Flow From Investing Activities
Capital expenditures (41,152) (30,652)
Deferred legal (114,561)
Sale of Germantown Square 2,982,641
Property deposits (2,734,951) (250,000)
----------- -----------
Net cash provided (used) by investing activities 91,977 (280,652)
Cash Flow from Financing Activities
Payoff of mortgage payable (1,346,750) (13,675)
Line of credit 1,515,644
Dividends paid (188,595) (108,422)
Distributions to limited partner (340,719) (340,862)
Financing costs (331,951) (34,027)
Net cash used in financing activities (692,371) (496,986)
Net increase (decrease) in cash and cash equivalents (65,052) (265,729)
Cash and cash equivalents at beginning of the period 2,298,334 678,196
----------- -----------
Cash and cash equivalents at end of the period $ 2,363,044 $ 412,467
=========== ===========
Supplemental Disclosure of Cash Activities
Interest Paid $ 72,665 $ 64,177
=========== ===========
</TABLE>
<PAGE>
CEDAR INCOME FUND, INC.
Notes to Consolidated Financial Statements
Unaudited
Note 1. Background, Organization and Reorganization of the Company
Cedar Income Fund, Ltd. (the "Company") was originally incorporated in Iowa on
December 10, 1984 under the name Cedar Income Fund, Ltd. ("Old Cedar"). Public
offerings of Common Stock were completed by Old Cedar in 1986 and 1988 and
raised approximately $19 million. Old Cedar invested the proceeds from these
offerings in four real estate properties and a mortgage loan participation,
utilizing only a minimum amount of indebtedness against the properties. The
mortgage loan participation has since been liquidated.
On April 2, 1998, Cedar Bay Company, ("CBC") a New York general partnership,
pursuant to a tender offer to purchase all of the outstanding shares of Common
Stock of Old Cedar for $7.00 per share in cash (the "Offer"), acquired
1,893,038.335 shares of Old Cedar's outstanding Common Stock, $1.00 par value
per share ("Old Common Stock"), representing approximately 85% of the
then-outstanding shares.
On June 26, 1998, Old Cedar merged with and into the Company, then newly formed
as a wholly-owned Maryland subsidiary of Old Cedar. Immediately thereafter, the
Company assigned substantially all of its assets and liabilities to a
newly-formed Delaware limited partnership, Cedar Income Fund Partnership, L.P.
(the "Operating Partnership"), in exchange for an aggregate of 2,245,411
operating partnership units of the Operating Partnership ("Units"), which
constituted the sole general partnership interest and all of the limited
partnership interests in the Operating Partnership. After such assignment, CBC
exchanged 1,703,300 shares of the Company's Common Stock, $0.01 par value per
share ("New Common Stock"), for 1,703,300 limited partnership units in the
Operating Partnership owned by the Company. The shares of New Common Stock were
cancelled by the Company upon their exchange by CBC. Following these
transactions, substantially all of the Company's assets consisted of the
controlling general partner interest of the Operating Partnership and
approximately 24% of the Units; substantially all of CBC's assets consisted of
189,737 shares of New Common Stock, approximately 35% of the then issued and
outstanding shares of New Common Stock, and approximately 76% of the Units.
As of November 5, 1999, a Subscription Agreement was entered into by and between
the Company and Uni-Invest Holdings (U.S.A.) B.V., pursuant to which Uni-Invest
Holdings (U.S.A.) B.V. acquired on or about November 15, 1999, through a private
placement, 150,000 shares of Common Stock of the Company at $4.50 per share
(which price as of such date of issue was higher than the quoted price for such
shares on the NASDAQ). As a result of such placement and other private
placements of an additional 250,000 shares of Common Stock, as of November 15,
1999, Uni-Invest Holdings (U.S.A.) B.V. owned approximately 16% of the Common
Stock of the Company. CBC's Common Stock ownership was correspondingly reduced
from approximately 35% to approximately 20%. Also in accordance with the
agreement, and pursuant to Board of Directors' approval and shareholders'
approval at a special meeting held on February 24, 2000, the Company changed its
name from Cedar Income Fund, Ltd. to Uni-Invest (U.S.A.), Ltd. effective as of
February 29, 2000. The name of the Operating Partnership was correspondingly
changed from Cedar Income Fund Partnership, L.P. to Uni- Invest (U.S.A.)
Partnership, L.P. as of February 29, 2000.
<PAGE>
Note 1. Background, Organization and Reorganization of the Company (Continued)
At a Board meeting held on November 18, 1999 the following persons were elected
to the positions respectively set forth below:
Richard Homburg Chairman of the Board
Louis Ph. Marcus Treasurer
Lawrence W. Freeman, Esq. Assistant Secretary
In addition, the Company, Uni-Invest Holdings (U.S.A) B.V. and CBC entered into
a Stockholders' Agreement effective as of the issuance of stock pursuant to the
Subscription Agreement, wherein Uni-Invest Holdings (U.S.A.) B.V. and CBC
agreed, among other things, to hold their shares for a period of not less than
five years and setting forth certain provisions for the orderly sale or other
disposition of shares under certain circumstances, and also to provide certain
other arrangements common to such stockholders' agreements, including but not
limited to subscriber's representations and warranties to the effect that (i)
the shares were being acquired for the subscriber's own account, (ii) the
subscriber was an "accredited investor" within the meaning of Rule 501(a)
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
and (iii) the subscriber had access to all documents and information requested.
Further the subscriber acknowledged that the shares were not been registered
under the Securities Act. Pursuant to the Subscription Agreement, the parties
also agreed to vote their shares in favor of a slate of directors pursuant to
which each of the respective parties would designate two persons for election as
directors of a board of directors which would also include not less than three
outside directors.
The Stockholders' Agreement also called for the creation by the Board of
Directors, as reconstituted, of an executive committee of the Board, the members
of which would have been Richard Homburg and Leo S. Ullman.
Further, the Subscription Agreement, provided for the transfer of 50% of the
stock of Cedar Bay Realty Advisors, Inc. ("CBRA") to an affiliate of Uni-Invest
Holdings (U.S.A.) B.V. and the participation by such affiliate of Uni-Invest
Holdings (U.S.A.) B.V. generally in any increase in income of CBRA attributable
to growth of advisory fees arising from services rendered to the Company and to
the Operating Partnership.
The Subscription Agreement also provided for an affiliate of Uni-Invest Holdings
(U.S.A.) B.V. to acquire, without additional consideration, a 50% interest in
each of SKR Management Corp. and Brentway Management LLC, which companies would
have been merged, or otherwise acquired by CBRA. Further, the subscription
agreement provided for Uni-Invest Holdings (U.S.A.) B.V. to succeed HVB Capital
Markets, Inc. ("HVB") as financial advisor to the Company, after the expiration
or other termination of the then existing agreement with HVB Capital Markets,
Inc(the "HVB Agreement"). HVB agreed to terminate the HVB Agreement effective as
of December 31, 1999.
Uni-Invest Holdings (U.S.A) B.V. and Leo S. Ullman entered into a Stockholders'
Agreement with respect to ownership of CBRA. That Agreement, in general, also
provided for a five year holding period, agreement among the parties to change
the name of CBRA to "Homburg/API Realty Advisors, Inc." and other provisions
common to such stockholder agreements, including but not limited to agreement
among the parties to vote their respective shares for a board of directors of
which both Leo Ullman and Richard Homburg would have been members.
<PAGE>
Note 1. Background, Organization and Reorganization of the Company (Continued)
The Subscription Agreement also called for the guarantee by Uni-Invest Holdings
(U.S.A.) B.V. of the funding on or before May 15, 2000 of $7.5 million in
exchange for shares of the Company and/or Units in the Operating Partnership at
$4.50 per share/ Unit. The proceeds of such contribution, together with $7.5
million to be raised by the Company from other private placements of shares of
stock or Units, from refinancing of its existing properties and/or the sale of
its interests in one or more of the existing properties, would have been used to
purchase three anchored strip shopping centers aggregating more than 700,000
square feet, substantially fully leased with many creditworthy tenants, in
Harrisburg (The Point Shopping Center), Lancaster (Golden Triangle Shopping
Center) and Philadelphia (Red Lion Shopping Center), Pennsylvania from CBC or
entities affiliated therewith. The aggregate purchase price for the three
properties was $15 million plus closing adjustments, where applicable, above
existing first mortgage liabilities estimated at approximately $37 million as of
March 31, 2000, and was subject to third-party appraisals and "fairness"
opinions by a reputable independent investment banking firm. The purchase
agreements to reflect the foregoing were executed by the parties as of April 28,
2000.
It was also agreed that CBC or its affiliates would contribute to the Operating
Partnership, upon sale of the three Pennsylvania Shopping Center Properties
described above, $2.5 million in cash in exchange for certain Units with certain
priority payments at 8%.
The Company had agreed to pay a fee to an affiliate of Uni-Invest Holdings
(U.S.A.) B.V. in the amount of 5% of the $7.5 million for which Uni-Invest
Holdings (U.S.A.) B.V. guaranteed the placement, if, in fact, such placement was
funded. The fee would have been payable in shares of Uni-Invest (U.S.A.), Ltd.
or Operating Partnership units of Uni-Invest (U.S.A.) Partnership, L.P. at $4.50
per share/unit. Further, in the event of funding by CBC or its affiliate(s) of
$2.5 million in cash in exchange for certain units, as described above, CBC or
its affiliate(s) would have received a fee equal to 5% of such funded placement
also payable in shares of Uni-Invest (U.S.A.), Ltd. or Operating Partnership
units in Uni-Invest (U.S.A.) Partnership, L.P. at $4.50 per share/unit.
Finally, the Company would have received an option to acquire a majority
ownership interest in a certain shopping center property of approximately
620,000 square feet and adjacent land in Pleasantville, New Jersey, subject to
certain contingencies.
The sale of the three shopping centers described above was originally subject to
a closing on or before May 15, 2000 and was subject to agreement on closing
adjustments, due diligence reviews, and consents, where applicable, of lenders
and partners. Due diligence reviews were satisfactorily completed and all lender
approvals were obtained. However, certain required documentation, including
mortgage assumption agreements, legal opinions, fairness opinions and the like,
were not completed as of May 15, 2000. Therefore, the shopping center purchase
agreements were amended to extend the closing date to be a date on or before
June 9, 2000.
The funding by Uni-Invest Holdings (U.S.A.) B.V. did not occur. As a result, the
Company and Uni-Invest Holdings (U.S.A.) B.V., mutually agreed to unwind the
entire transaction subject to certain conditions, including, but not limited to,
the Company's option to repurchase Uni-Invest Holdings (U.S.A.) B.V.'s Common
Stock and change the name of the Company and the Operating Partnership to
eliminate the Uni-Invest name, to remove Richard Homburg and Louis Marcus as
directors and Chairman of the Board and Treasurer, respectively, and to remove
Lawrence Freeman as Assistant Secretary.
<PAGE>
Note 1. Background, Organization and Reorganization of the Company (Continued)
On or about July 31, 2000 the Company received the resignations of Richard
Homburg and Louis Marcus as members of the Board of Directors. Mr. Freeman's
resignation was received on or about June 21, 2000. Prior to the receipt of such
resignations, the Company agreed to pay $4.60 per share to repurchase the
150,000 shares previously purchased by Uni-Invest Holdings (U.S.A.) B.V.,
without obligation to pay any further dividends with respect to such shares.
Such payment in the amount of $690,000 was made to Uni-Invest Holdings (U.S.A.)
B.V. on July 31, 2000.
Further, and in addition to the "unwind" provisions outlined in the Subscription
Agreement, the Company agreed, no later than September 30, 2000, to repurchase,
or arrange for the purchase by others of, a total of 100,000 shares of stock in
the Company proportionately (40%) from each of the seven shareholders introduced
by Uni-Invest Holdings (U.S.A.) B.V. at the same price per share and upon the
same conditions as the previously completed repurchase of shares of the Company
from Uni-Invest Holdings (U.S.A.) B.V. The Company has also undertaken to
register the remaining 150,000 shares of stock in the Company owned by such
seven shareholders and to use its best efforts to purchase or find replacement
purchasers for the remaining 150,000 shares owned by such seven shareholders
also at $4.60 per share without further dividend rights, subject to NASDAQ and
SEC rules. The Company and Uni-Invest Holdings (U.S.A.) B.V. exchanged mutual
releases against any claims either may have against each other arising prior to
July 31, 2000.
Effective as of August 3, 2000 the Company changed its name (back) to Cedar
Income Fund, Ltd. The name of the Operating Partnership was correspondingly
changed (back) to Cedar Income Fund Partnership, L.P. The Company's NASDAQ Stock
Market symbol was changed (back) to CEDR as of August 7, 2000.
With the exception of the acquisition as of July 1, 2000 of a 50% interest in
The Point Associates, L.P., owner of the center in Harrisburg, Pennsylvania, the
Company has postponed its purchase of the Pennsylvania shopping centers
described above.
On May 11, 2000 the Operating Partnership pursuant to the operation of a
"buy-sell" provision in the Agreement of Co-Tenancy by and between Life
Investors Insurance Company of America ("Life Investors") and the Operating
Partnership (as successor in interest to Cedar Income Fund 2, Ltd.) (the
"Agreement"), sold its 50% interest in the Germantown Square Shopping Center,
(Louisville, KY) ("Germantown") to Life Investors for $3 million. The Operating
Partnership incurred expenses, including title charges (as required in the
Agreement) and other costs in the aggregate amount of approximately $9,000 in
connection with the transaction. The Operating Partnership initiated the
"buy-sell" provision of the Agreement by written notice given to Life Investors
on April 3, 2000. Life Investors notified the Operating Partnership by letter
dated April 28, 2000 that it elected to buy the Operating Partnership's 50%
interest.
<PAGE>
Note 1. Background, Organization and Reorganization of the Company (Continued)
Net closing adjustments for real estate taxes and prepaid rent in the aggregate
amount of $8,609.96 were charged against the Operating Partnership. In addition,
the parties agreed that Life Investors would make, and the Operating Partnership
would accept, the distributions attributable to April 2000 and May 2000 on or
about the 20th of the month succeeding the month attributable to such
distribution. The distributions attributable to April 2000 and May 2000 in the
amounts of $59,047.35 and $8,538.39, respectively, have been received. The net
sales amount received by the Operating Partnership was $2,982,640.79 exclusive
of distributions. $3,000,000 was invested in qualifying money market instruments
until it was utilized to acquire the Operating Partnerships' 50% partnership
interest in The Point Associates, L.P., discussed below.
Cedar Bay Realty Advisors, Inc. ("CBRA") was entitled to receive a disposition
fee from the Company for the Germantown transaction in accordance with the terms
of the investment advisory agreement between CBRA and the Company in an amount
not to exceed 3%. CBRA agreed with management of the Company to defer a portion
of its fee and accepted a fee of 2.5%. After stipulated limiting conditions,
such fee was calculated to be $22,500.
The cost basis for Germantown on the books of the Operating Partnership and the
Company as of the closing date was $2,889,496. Accordingly, the Company and
Operating Partnership realized a gain on such sale of approximately $91,012.
As of July 1, 2000, pursuant to a Purchase and Sale Agreement dated as of that
date, the Operating Partnership through, a newly-created limited liability
company (The Point Shopping Center LLC), in which the Operating Partnership, (of
which the Company is the sole general partner) is the sole member, purchased a
50% partnership interest in The Point Associates, L.P., the partnership entity
that owns The Point Shopping Center in Harrisburg, Pennsylvania, a 320,000 s.f.
shopping center ("The Point"), for $2,100,000 plus closing adjustments of
approximately $385,000. The purchase price was based on 50% of the appraised
value of the property less the existing first mortgage debt (i.e. $13,500,000
less $9,300,000 or $4,200,000 x .5). The purchase price was funded primarily by
the proceeds of the sale of the Operating Partnership's interest in Germantown,
which was sold in April 2000 for $3,000,000.
The 50% interest in The Point Associates, L.P, acquired by the Operating
Partnership, was purchased from Selbridge Corp. ("Selbridge"), then the sole
general partner of The Point Associates, L.P., by assignment of a 42%
partnership interest, and from Leo S. Ullman, then the sole limited partner of
The Point Associates, L.P., by assignment of an 8% partnership interest. Mr.
Ullman's 8% interest represented his entire interest in The Point Associates,
L.P. Simultaneously with the assignment of partnership interests, Selbridge
became a limited partner and The Point Shopping Center LLC became the general
partner. The transfers resulted in the Operating Partnership (through The Point
Shopping Center LLC) owning a 50% general partnership interest and Selbridge
owning a 50% limited partnership interest in The Point Associates, L.P.
The Operating Partnership has the right to acquire an additional 39% partnership
interest from Selbridge at any time at a price equal to the fractional interest
to be acquired multiplied by ten times net operating income less the outstanding
first mortgage debt. Selbridge is prohibited from selling its remaining interest
in The Point Associates, L.P. without first offering to sell such interest to
the Operating Partnership based upon the aforementioned formula.
<PAGE>
Note 1. Background, Organization and Reorganization of the Company (Continued)
The proceeds of Mr. Ullman's 8% limited partnership interest were used to repay
a loan from Selbridge to Mr. Ullman to buy such partnership interest. Selbridge
paid a disposition fee to SKR Management Corp. in the amount of $67,500. Mr.
Ullman is sole owner, director and President of SKR Management Corp. CBRA, Inc.
has waived any rights to any acquisition fee from the Company to which it may
otherwise have been entitled as a result of The Point Shopping Center
transaction.
The Point Associates, L.P. intends to redevelop The Point Shopping Center during
the next 18 months based primarily upon construction of a new 54,000 s.f. store
reflecting a lease dated June 19, 2000 between Giant Food Stores, Inc. ("Giant")
and The Point Associates, L.P. Such lease requires, among other things,
construction of the new Giant premises, demolition and reconstruction of certain
existing portions of the shopping center, relocation of certain existing
tenants, new stores for certain new tenants and reconfiguration and repaving of
the parking lot. In addition, pursuant to the terms of the Giant lease, Giant
was required to pay $1,500,000 to The Point Associates, L.P. towards the
termination of certain leases, and up to an additional $250,000 for certain
other tenant relocations. In consideration of receipt of $1,500,000 from Giant,
The Point Associates, L.P. undertook to post a $1,500,000 letter of credit or an
acceptable guaranty of $1,500,000 for Giant's benefit for two years. The Company
gave such guaranty and Selbridge gave the Company a letter of credit in the
amount of $750,000, representing Selbridge's 50% share of the guaranty.
The Point Associates, L.P. has applied to increase its first mortgage on The
Point Shopping Center from $9,300,000 to $17,900,000. After closing costs, it is
estimated that net proceeds of approximately $8,100,000 will be available for
the redevelopment. The redevelopment net costs (i.e. after crediting the Giant
payments) are estimated at $9,650,000; resulting in additional capital required
of The Point Associates, L.P. in the amount of approximately $1,550,000 to be
funded by the partners.
During the period commencing July 1, 2000 until the earlier of (i) the date
Giant commences to pay rent or (ii) December 31, 2001, Selbridge has guaranteed
to The Point Shopping Center LLC a 10% return on its purchase price of
$2,100,000 (i.e. $210,000 per annum).
As The Point was owned by Cedar Bay Company or its affiliates, the owner of
189,767 shares of the outstanding stock of the Company, and 1,703,300 of the
outstanding Operating Partnership units, the Board of Directors of the Company
retained Houlihan Lokey Howard & Zukin Financial Advisors, Inc., an investment
bank unaffiliated with the Company, to render an opinion as to the fairness,
from a financial point of view, to the Company/Operating Partnership of the
purchase by the Operating Partnership of an interest in any or all of the three
Pennsylvania shopping centers, including The Point Shopping Center, owned by
Cedar Bay Company, or affiliates thereof at the appraised values. In addition to
the fairness opinion, the Company obtained a third party appraisal, which valued
The Point Shopping Center as a whole at $13,500,000 (such appraisal was
completed prior to, and did not include a value for, the recently-executed Giant
Food Stores lease). The Point Shopping Center is managed by Brentway Management
LLC and SKR Management Corp. which companies receive management, leasing and
construction management fees.
<PAGE>
Note 1. Background, Organization and Reorganization of the Company (Continued)
The Company has a $10 million line of credit from a national commercial bank
secured by first mortgage liens on properties of the Operating Partnership. The
Company closed on the line of credit facility on May 10, 2000. The first
drawdown was used to pay off the then existing first mortgage on the Utah
Property. Such first drawdown was in the amount of $1,515,644.08 which included
$1,358,789.39 payable to the Utah first mortgagee, legal fees for the bank and
the Company, title charges, the bank's quarterly administrative fee, and a
prepayment penalty which is classified as an extraordinary item on the
Consolidated Statement of Operations.
The Company received an offer of $1,850,000 for the sale of its 25,200 s.f.
office facility in Bloomington, Illinois. The offer is subject to a thirty (30)
day purchaser "due diligence" period. If concluded, the sale would occur on or
before September 1, 2000. A brokerage fee in the amount of $50,000 would be
payable to an outside broker. The property currently has 6,507 s.f. (25%)
vacant. There is a lease proposal outstanding for 2,590 square feet. If the sale
of the property is concluded, the leasing costs associated with the new lease,
if concluded, will be paid by the purchaser. The Company's book value is
$2,053,979. A contract of sale has been delivered to the prospective purchaser,
but has not been executed. The asset has been reclassified to Real Estate held
for sale. In accordance with FASB 121, "Accounting for the impairment of long
lived assets to be disposed of", the Company has reduced the carrying value of
the asset to its estimated fair value. Accordingly, an impairment loss of
approximately $204,000 was recorded in the second quarter of 2000.
CBC is a New York general partnership. The Point Associates, L.P. a Pennsylvania
limited partnership, and Triangle Center Associates, L.P. a Pennsylvania limited
partnership, were the sole partners of CBC during 1998. Until July 1, 2000, the
general partner of The Point Associates, L.P. was Selbridge Corp., a Delaware
corporation (Selbridge Corp. is now a limited partner). The general partner of
Triangle Center Associates is Buttzville Corp., a Delaware corporation. Leo S.
Ullman was the sole limited partner in each of The Point Associates, L.P. and
Triangle Center Associates, L.P. and is an executive officer and a director of
each of Selbridge Corp. and Buttzville Corp. As of July 1, 2000, Mr. Ullman's
limited partnership interest was sold to The Point Shopping Center, LLP. During
March and April 1999 The Point Associates, L.P. and Triangle Center Associates,
L.P., respectively, transferred their interests in CBC to TPA Ownership L.L.C.
("TPA") resulting in TPA temporarily being sole partner of CBC. Hicks Management
Corp. ("Hicks"), Ledford Corp. ("Ledford"), and Thomsville Corp. ("Thomsville")
were equal members in TPA. Leo S. Ullman is an executive officer and a director
of each of the aforementioned members of TPA. Effective December 31, 1999, TPA
was dissolved and all of the member interests were assigned to Hicks, Ledford,
and Thomsville, as general partnership interests, in equal one-third portions.
Immediately following and also effective December 31, 1999, each of the
aforementioned general partners transferred its one-third general partnership
interests to Duncomb Corp., Lindsay Management Corp. and Hicks Corp. The
transfers resulted in Duncomb Corp. having a 55% interest, Lindsay Management
Corp. a 40% interest, and Hicks Corp., a 5% interest. Mr. Ullman is an executive
officer and a director in Duncomb Corp., Lindsay Management Corp., and Hicks
Corp.
Currently, a Unit in the Operating Partnership and a share of Common Stock of
the Company have essentially the same economic characteristics, as they
effectively share equally in net income or loss and distributions of the
Operating Partnership.
<PAGE>
Note 1. Background, Organization and Reorganization of the Company (Continued)
The Company operates as a real estate investment trust ("REIT"). To qualify as a
REIT under applicable provisions of the Internal Revenue Code of 1986, as
amended, and Regulations thereto, the Company must have a significant percentage
of its assets invested in, and income derived from, real estate and related
sources. The Company's objectives are to provide its shareholders with a
professionally managed, diversified portfolio of commercial real estate
investments which will provide the best available cash flow and present an
opportunity for capital appreciation.
The Company, through its Operating Partnership, owns and operates three office
properties aggregating approximately 224,000 square feet (as of May 11, 2000
after the sale of Germantown), located in Jacksonville, Florida, Salt Lake City,
Utah, and Bloomington, Illinois.
Cedar Bay Realty Advisors, Inc. ("CBRA" and/or "Advisor") serves as investment
advisor to the Company pursuant to an Administrative and Advisory Agreement with
the Company substantially similar to the terms of that agreement previously in
effect between Old Cedar and AEGON USA Realty Advisors, Inc. ("AEGON") of Cedar
Rapids, Iowa, which served as investment advisor to the Company from formation
until April 3, 1998. Brentway Management LLC ("Brentway" and/or "Property
Manager"), a New York limited liability company, provides property management
services for the Company's properties pursuant to a management agreement with
the Company on substantially the same terms as the agreement previously in
effect with AEGON. Brentway and CBRA are both affiliates of CBC, SKR Management
Corp. and Leo S. Ullman. Leo S. Ullman is President and is expected to be
reinstated as Chairman of the Board of the Company at the next meeting of the
Board of Directors.
Note 2. Description of Business and Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 2000 are not necessarily indicative of the results that may be expected for
year ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant Company's Annual Report on Form
10-K for the year ended December 31, 1999.
<PAGE>
Note 2. Description of Business and Significant Accounting Policies (Continued)
Basis of Presentation and Summary of Significant Accounting Policies (Continued)
Consolidation Policy and Related Matters
The accompanying consolidated financial statements include the consolidated
financial position of the Company and the Operating Partnership as of June 30,
2000. All significant intercompany balances and transactions have been
eliminated in consolidation.
As the Company owns the sole general partnership interest in the Operating
Partnership, which provides the Company with effective control over all
significant activities of the Operating Partnership, the Operating Partnership
is consolidated with the Company in the accompanying financial statements as of
June 30, 2000.
The limited partner's interest as of June 30, 2000 (currently owned entirely by
CBC) represents approximately a 64% limited partnership interest in the equity
of the Operating Partnership.
Currently, a Unit in the Operating Partnership and a share of Common Stock of
the Company have essentially the same economic characteristics, as they
effectively share equally in net income or loss and distributions of the
Operating Partnership.
The accompanying financial statements include its 50% co-tenancy interest in the
assets, liabilities and operations of the Germantown retail property, until date
of sale on May 11, 2000.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Minimum rental income is recognized on a straight-line basis over the term of
the lease. The excess of rents recognized over amounts contractually due is
included in deferred rents receivable on the accompanying balance sheets.
Contractually due but unpaid rents are included in tenant receivables on the
accompanying balance sheets. Certain lease agreements provide for reimbursement
of real estate taxes, insurance, common area maintenance costs and indexed
rental increases, which are recorded on an accrual basis.
Real Estate
Depreciation is computed utilizing the straight-line method over the estimated
useful lives of ten to forty years for buildings and improvements. Tenant
improvements, which are included in buildings and improvements, are amortized on
a straight-line basis over the term of the relevant lease.
<PAGE>
Note 2. Description of Business and Significant Accounting Policies (Continued)
Basis of Presentation and Summary of Significant Accounting Policies (Continued)
Cash Equivalents
The Company considers highly liquid investments with a maturity of three months
or less when purchased, to be cash equivalents.
Deferred Costs
Leasing fees and loan costs are capitalized and amortized over the life of the
relevant lease or loan.
Stock Options
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because, the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation," (SFAS No. 123) requires use of option valuation
models that were not developed for use in valuing employee stock options.
The Company established a stock option plan (the "Plan") for the purpose of
attracting and retaining executive officers, directors and other key employees.
Five Hundred Thousand (500,000) of the Company's authorized shares of Common
Stock have been reserved for issuance under the Plan. The Plan is administered
by a committee of the Board of Directors, which committee will, among other
things, select the number of shares subject to each grant, the vesting period
for each grant and the exercise price (subject to applicable regulations with
respect to incentive stock options) for the options. As of June 30, 2000, no
options have been granted under the Plan.
Earnings Per Share
Statement of Financial Accounting Standard Board ("FASB") No. 128, "Earnings per
Share", was issued and adopted by the Company during 1997. Statement No. 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Since the Company has no potentially
dilutive securities outstanding, basic and diluted net income per share in
accordance with Statement No. 128 are the same and do not differ from amounts
previously reported as net income per share (primary earnings per share).
Accordingly, basic and diluted net income per share is computed using the
weighted average number of shares outstanding during the year.
Basic and diluted net income per share is based on the weighted average number
of shares outstanding (942,651 for the six months ended June 30, 2000 and
542,111 for the first two-quarters of 1999). Dividends to shareholders per share
are based on the actual number of shares outstanding on the respective dates.
<PAGE>
Note 2. Description of Business and Significant Accounting Policies (Continued)
Basis of Presentation and Summary of Significant Accounting Policies (Continued)
Earnings Per Share (Continued)
In 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income"
("Statement 130") which is effective for fiscal years beginning after December
15, 1997. Statement 130 established standards for reporting comprehensive income
and its components in a full set of general-purpose financial statements.
Statement 130 requires that all components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. The adoption of this standard had no impact on the
Company's financial position or results of operations.
Segment Reporting
In 1997, the FASB issued Statement No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131") which is effective for fiscal
years beginning after December 15, 1997. SFAS 131 establishes standards for
reporting information about operating segments in annual financial statements
and in interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The adoption of this standard had no impact on the Company's financial position
or results of operations. The Company owns all of the interests in real estate
properties through the Operating Partnership. Previously, each of the properties
were evaluated on an individual basis. However, due to the numerous changes
being made by the Company or discussed in Note 1, the company has changed the
composition of its reportable segments to one segment.
Recent Pronouncements
In June 1999, the FASB issued Statement No. 137, amending Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which extended
the required date of adoption to the years beginning after June 15, 2000. The
Statement permits early adoption as of the beginning of any fiscal quarter after
its issuance. The Company expects to adopt the new Statement effective January
1, 2001. The Company does not anticipate that the adoption of this Statement
will have any effect on its results of operations or financial position.
Income Taxes
The Company generally will not be subject to federal income taxes as long as it
qualifies as a REIT under Sections 856-869 of The Internal Revenue Code of 1986,
as amended (the "Code"). A REIT will generally not be subject to federal income
taxation on that portion of income that qualifies as REIT taxable income and to
the extent that it distributes such taxable income to its stockholders and
complies with certain requirements of the Code relating to income and assets. As
a REIT, the Company is allowed to reduce taxable income by all or a portion of
distributions to stockholders and must distribute at least 95% of its REIT
taxable income to maintain qualification as a REIT. As distributions, for
federal income tax purposes, have exceeded REIT taxable income, no federal
income tax provision has been made.
<PAGE>
Note 2. Description of Business and Significant Accounting Policies (Continued)
Basis of Presentation and Summary of Significant Accounting Policies (Continued)
Impairment of Long-Lived Assets
The Company reviews its real estate assets if indicators of impairment are
present to determine whether the carrying amount of the asset will be recovered.
Recognition of impairment is required if the undiscounted cash flows estimated
to be generated by the assets are less than the asset's carrying amount. The
impairment loss is measured by comparing the fair value of the asset to its
carrying amount.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Note 3. Real Estate and Accumulated Depreciation
The Company's properties are leased to various tenants, whereby the Company
incurs normal real estate operating expenses associated with ownership.
Note 4. Mortgage Loan Payable
On October 30, 1992 the Company borrowed $1,500,000 to finance an existing
property. The Company paid off the mortgage loan on May 10, 2000 with a (the
first) drawdown on its commercial bank line of credit. The total due to the
mortgagee as of May 10, 2000 was $1,358,789.39 which amount was net of the real
estate tax escrow and included accrued interest and a 3% pre-payment penalty of
$40,104.48. Such prepayment penalty along with unamortized loan fees is included
in the accompanying Consolidated Statement of Operations as an extraordinary
item.
Note 5. Related Party Transactions
Administrative and Advisory Services
The Company does not have any employees and has contracted with Cedar Bay Realty
Advisors, Inc., a New York corporation ("CBRA") to provide administrative,
advisory, acquisition and divestiture services to the Company pursuant to an
Administrative and Advisory Agreement (the "Advisory Agreement") entered into in
April 1998. CBRA is wholly owned by Mr. Ullman. Mr. Ullman is President and a
director of, and Brenda J. Walker is Vice President of, CBRA. The term of the
Advisory Agreement is for one (1) year and is automatically renewed annually for
an additional year subject to the right of either party to cancel the Advisory
Agreement upon 60 days written notice.
Under the Advisory Agreement, CBRA is obligated to: (a) provide office space and
equipment, personnel and general office services necessary to conduct the
day-to-day operations of the Company; (b) select and conduct relations with
accountants, attorneys, brokers, banks and other lenders, and such other parties
as may be considered necessary in connection with the Company's business and
investment activities, including, but not limited to, obtaining services
required in
<PAGE>
Note 5. Related Party Transactions (Continued)
the acquisition, management and disposition of investments, collection and
disbursement of funds, payment of debts and fulfillment of obligations of the
Company, and prosecuting, handling and settling any claims of the Company; (c)
provide property acquisition and disposition services, research, economic and
statistical data, and investment and financial advice to the Company; and (d)
maintain appropriate legal, financial, tax, accounting and general business
records of activities of the Company and render appropriate periodic reports to
the Directors and stockholders of the Company and to regulatory agencies,
including the Internal Revenue Service, the Securities and Exchange Commission,
and similar state agencies.
CBRA receives fees for its administrative and advisory services as follows: (a)
a monthly administrative and advisory fee equal to 1/12 of 3/4 of 1% of the
estimated current value of real estate assets of the Company, plus 1/12 of 1/4
of 1% of the estimated current value of all other assets of the Company; (b) an
acquisition fee equal to 5% of the gross purchase price (before expenses and
without deducting indebtedness assumed) of any real property acquired during the
term of the Advisory Agreement; provided that the total of all such acquisition
fees plus acquisition expenses in connection with the purchase of any real
property shall be reasonable and shall not exceed 6% of the amount paid or
allocated to the purchase, development, construction or improvement of a
property, exclusive of acquisition fees and acquisition expenses; and (c) a
disposition fee equal to 3% of the gross sales price (before expenses but
without deducting any indebtedness against the property) of any real property
disposed of during the term of the Advisory Agreement; provided that no
disposition fee shall be paid unless and until the stockholders have received
certain distributions from the Company. In addition, CBRA may receive one-half
of the brokerage commission on such a disposition but only up to 3% of the price
actually paid for the property, subject to certain limitations. Furthermore, if
the Advisory Agreement is terminated prior to the liquidation of the Company,
CBRA will be entitled to payment of disposition fees based on the ratio of the
number of years the Advisory Agreement was operative to the number of years from
the date the Advisory Agreement was entered into that such fee became payable.
No incentive or acquisition fees were paid during the first two quarters of
2000. A disposition fee for the sale of Germantown in the amount of $22,500 was
paid to CBRA during the second quarter of 2000.
Management Services
Brentway Management LLC, a New York limited liability company ("Brentway")
provides property management and leasing services to the Company's real property
pursuant to a Management Agreement (the "Management Agreement") entered into in
April 1998. Brentway is owned by Mr. Ullman and Ms. Walker, who are also
Chairman and President of Brentway, respectively. The term of the Management
Agreement is for one (1) year and is automatically renewed annually for an
additional one year period subject to the right of either party to cancel the
Management Agreement upon 60 days' written notice. Under the Management
Agreement, Brentway is obligated to provide property management services, which
include leasing and collection of rent, maintenance of books and records,
establishment of bank accounts and payment of expenses, maintenance and
operation of property, reporting and accounting to the Company regarding
property operations, and maintenance of insurance. All of the duties of Brentway
are to be fulfilled at the Company's expense; provided, however, that the
Company is not required to reimburse Brentway for personnel expenses other than
for on-site personnel at the properties managed. Brentway receives fees for its
property management services as follows: a monthly management fee equal to 5% of
<PAGE>
Note 5. Related Party Transactions (Continued)
the gross income from properties managed and leasing fees of up to 6% of the
rent to be paid during the term of the lease procured.
Brentway has subcontracted with various local management companies for site
management and leasing services.
Financial Advisory Agreement
In June 1998, the Company entered into a Financial Advisory Agreement (the "HVB
Agreement") with HVB Capital Markets Inc., as successor to B.V. Capital Markets,
Inc. ("HVB"), pursuant to which HVB agreed to perform the following services as
financial advisor to the Company: (a) advise on acquisition financing and/or
lines of credit for future acquisitions; (b) advise on acquisitions of United
States real property interests and the consideration to be paid therefor; (c)
advise on private placements of the shares of the Company; (d) assist the Board
of Directors in developing suitable investment parameters for the Company; (e)
develop and maintain contacts on behalf of the Company with institutions with
substantial interests in real estate and capital markets; (f) advise the Board
with respect to additional private or public offerings of equity securities of
the Company; (g) review certain financial policy matters with consultants,
accountants, lenders, attorneys and other agents of the Company; and (h) prepare
periodic reports of its performance of the foregoing services. As compensation
for the foregoing services, the Company was required to pay HVB, (i) .25% of the
Company's net asset value, less any indebtedness affecting such net value, but
in any event, not less than $100,000 per year; (ii) a one-time payment of 1.5%
of 90% of the agreed value of properties contributed to the Company or its
affiliates by persons introduced to the Company by HVB; and (iii) upon the
Company Item becoming self-administered, a one-time payment equal to five times
the annual fee income attributable to fee receipts from clients or contacts of
HVB that have contributed property to the Company. The term of the HVB Agreement
was for a period of one (1) year and was automatically renewed for an additional
year subject to the right of either party to cancel at the end of any year upon
60 days' written notice. Mr. Jean-Bernard Wurm, a Director of the Company from
April 1998 until December 31, 1999, when he resigned, is a director of HVB. HVB
was paid for financial advisory services in 1999. HVB agreed to terminate the
HVB Agreement effective as of December 31, 1999. Uni-Invest Holdings (U.S.A.),
B.V. succeeded to that contract effective January 1, 2000. No fees were paid to
Uni-Invest Holdings (U.S.A.), B.V. under that contract.
<PAGE>
Note 5. Related Party Transactions (Continued)
January 1 - January 1 -
June 30, 2000 June 30, 1999
------------- --------------
Management Fees
AEGON $ 9,118 $ 8,802
Brentway 24,742 27,547
Leasing Fees
AEGON 552 --
Administrative and Advisory
CBRA 48,936 48,936
AEGON -- --
HVB 50,000
Uni-Invest Holdings (U.S.A.) B.V --
Legal
SKR 10,687 15,713
Fees of $10,687 were paid to Stuart H. Widowski, Esq., SKR Management Corp.'s
in-house counsel and Secretary of the Company, through SKR Management Corp., an
affiliate of CBRA, Brentway, CBC and Leo S. Ullman, for legal services provided.
Note 6. Co-tenancy Interest
On September 28, 1988, the Company purchased a 50% co-tenancy interest in
Germantown. The remaining 50% co-tenancy interest was owned by Life Investors,
an affiliate of AEGON. Germantown was managed solely by AEGON. On May 11, 2000
the Operating Partnership sold its 50% co-tenancy interest at a gain of $91,012.
All amounts due to or from the co-tenancy partner have been paid in full.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the historical
financial statements of the Company and related notes.
Results of Operations
The Company owns office, office/warehouse, and retail properties in three U.S.
cities. The Company's properties continue to compete with centers and office
buildings of similar size, tenant mix and location. As of June 30, 2000, the
combined lease occupancy of the Company's three properties (Corporate Center
East, Southpoint Parkway Center and Broadbent Business Center) was 87%.
Operating results in the forthcoming year will be influenced by the ability of
current tenants to continue paying rent, and the Company's ability to renew
expiring tenant leases and obtain new leases at competitive rental rates.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Rental income for the three months and six month periods ended June 30, 2000 was
$558,240 and $1,214,132, respectively, compared to $594,825 and $1,248,076,
respectively, for the corresponding period in 1999, a decrease of approximately
$37,000 and $34,000, respectively. This decrease is primarily attributable to
the sale of Germantown on May 11, 2000.
Interest income increased by approximately $70,000 due to the additional funds
available for investment generated by the November 15, 1999 sale of Common Stock
(see Note 1 to the financial statements).
Total property expenses, excluding depreciation, were $216,857 and $433,720 for
the three month and six month periods ended June 30, 2000 compared to $238,682
and $446,262 for the corresponding periods in 1999, a decrease of approximately
$22,000 and $13,000, respectively.
Net income (loss) for the three month and six month periods ended June 30, 2000
were ($55,615) (($0.06) per share) and $7,960 ($0.01 per share) compared to
$19,522 ($0.04 per share) and $56,486 ($0.10 per share) for the corresponding
period in 1999. This decrease is attributable to the recognition of the
impairment loss on the potential sale of the Bloomington, Illinois property.
This loss is offset, in part, by the gain on the actual sale of Germantown. Net
income before the impairment loss, gain on segment disposal, limited partner's
interest, and early extinguishment of debt for the three months and six months
ended June 30, 2000 was $63,620 and $270,669 compared to $116,181 and $294,731,
a decrease of $52,561 and $24,062 respectively. This decrease is attributable
to the one time termination payment received by a vacating tenant at the
Bloomington, Illinois property during the second quarter of 1999.
Liquidity and Capital Resources
The Company's liquidity at June 30, 2000 represented by cash and cash
equivalents was $2,363,044 compared to $2,298,334 at December 31, 1999, an
increase of $64,710. The Company has continued its policy to date of
distributing dividends equal to $0.10 per share, an amount generally equal to
$54,211 per quarter through November 14, 1999 and $94,211 since the sale of
additional stock on November 15, 1999. After the repurchase on July 31, 2000 of
the 150,000 shares owned by Uni-Invest Holdings (U.S.A.) B.V., dividends will be
approximately $79,211 per quarter. In addition, the Company has maintained a
policy of distributing equal amounts per Operating Partnership Unit of
Cedar Income Fund Partnership, L.P. Such amounts generally equal $170,330 per
quarter. Such distributions are substantially in excess of amounts presently
required to be distributed in order to meet the tests for continued REIT status
which generally require distributions of 95% of qualified REIT taxable income,
as defined in the Internal Revenue Code of 1986 and Regulations thereto. During
the six month period ended June 30, 2000, for example, earnings per share were
approximately $0.01. If the Company's dividend policy is to continue, absent
further growth in income of the Operating Partnership, the ability to distribute
dividends substantially in excess of current income could impair the cash
reserves which the Directors would deem to be appropriate to the business of the
Company.
Further, after the acquisition of the three Pennsylvania shopping centers owned
by CBC or its affiliates, the Company's new commercial bank line of credit
limits, while such credit facility is outstanding, dividends/distributions to
75% of Funds From Operations less capital expenditures plus (i) amounts
necessary to maintain
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
the Company's real estate investment trust status and (ii) amounts necessary to
avoid payment by the Company of federal, state and excise taxes. With the
exception of the Operating Partnerships acquisition of a 50% partnership
interest in The Point Associates, L.P., such Pennsylvania shopping center
acquisitions have been postponed.
Inflation
Low to moderate levels of inflation during the past few years have favorably
impacted the Company's operations by stabilizing operating expenses. At the same
time, low inflation has the indirect effect of reducing the Company's ability to
increase tenant rents. The Company's properties have tenants whose leases
include expense reimbursements and other provisions to minimize the affect of
inflation. These factors, in the long run, are expected to result in more
attractive returns from the Company's real estate portfolio as compared to
short-term investment vehicles.
Year 2000 Issue
The Company has received no reports of incidents of system or facilities
malfunctions related to the inability of computers and/or computer software to
process and calculate date-related information from and after January 1, 2000.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
Part II Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Securities Holders
Item 5. Other Information
None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
1. Form 8-K dated July 1, 2000 was filed relating to the acquisition
of a 50% interest in The Point Associates, L.P.
2. On August 10, 2000, Form 8-K/A dated July 1, 2000 was filed
amending Form 8-K filed on July 1, 2000.
<PAGE>
CEDAR INCOME FUND, LTD.
June 30, 2000
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CEDAR INCOME FUND, LTD.
/s/ Leo S. Ullman /s/ Brenda J. Walker
----------------------------- ---------------------------
Leo S. Ullman Brenda J. Walker
President Vice President and Director
(principal executive officer) (principal financial officer)
/s/ Ann Maneri
-----------------------------
Ann Maneri
Controller
(principal accounting officer)
August 11, 2000
